* Dollar up as investors ponder further Fed tightening
* Aussie falls for a fourth day, reaching 32-month low
* Sterling jumps on Brexit deal hopes
* Graphic: World FX rates in 2018 (Adds analyst quote, updates prices)
By Tom Finn
LONDON, Oct 5 (Reuters) – The dollar edged toward a six-week
high on Friday before monthly U.S. jobs data that investors hope
will shed light on how much longer the Fed’s aggressive
rate-hiking cycle will continue.
The U.S. currency is outperforming other major currencies as
the U.S. economy continues to grow strongly while recent data in
other large economies, including the euro zone, has come in
Investors are watching for signs of increasing U.S.
inflation as companies including Amazon raise minimum
wages. Friday’s non-farm payrolls release for September will
give new indications of wage growth and labour market strength.
The dollar index , which measures its performance
against a basket of six currencies, was 0.1 percent higher on
the day at 95.907, closing in on a six-week high of 96.121.
Private payrolls data came in stronger than forecast on
Thursday, pushing the yield on the benchmark 10-year U.S.
Treasury note to its highest levels since May 2011.
"We have downplayed the relevance of the U.S. labour market
report for the dollar … but the data might become more
significant again now there is debate over how much longer the rate hike cycle will continue," said Antje Praefcke, a
currency strategist at Commerzbank in Frankfurt.
The U.S. central bank foresees another interest rate hike in
December, three more next year, and one in 2020.
Fed Chairman Jerome Powell on Wednesday talked up the U.S.
economy, saying that the United States is on the verge of a
"historically rare" era of ultra-low unemployment and tame
That spooked investors and caused U.S. Treasury yields and
the euro/dollar currency pair to breach key technical levels.
But even if the job’s data beats expectations the dollar
might not move significantly because the bar for an upward
surprise has been raised by recent strong data, analysts at MUFG
"Powell has commented that this level of wage growth is not
necessarily a sign of an overheating labour market signalling
the Fed remains comfortable with gradual rate hikes," the
AUSSIE FALLS TO MULTI-YEAR LOW
The Australian dollar , often viewed as a barometer
of risk appetite, slipped 0.3 percent to $0.7054, a 32-month
low, as U.S. yield spreads continued to widen, pressuring stock
markets and risk appetite around the world.
The Aussie, extending losses into a fourth straight session,
has now fallen 2.1 percent this month.
The euro edged down 0.1 percent to $1.1497 after
brushing a six-week low of $1.1463 during Thursday’s session.
The dollar will continue to strengthen against the euro as
well as the yen, with the common currency likely slipping back
below the psychologically significant $1.15 handle, said Yukio
Ishizuki, senior currency strategist at Daiwa Securities.
The euro is down about 0.8 percent against the dollar this
Sterling rose to a three-month high versus the euro on
Friday after the European Union’s Brexit negotiators said that a
divorce deal with Britain was "very close".
The pound rose to 88.11 pence , its highest since
July 9, after the report, which cited two diplomatic sources.
(Additional reporting by Daniel Leussink in Tokyo; editing by